Agency Set to Issue Warnings : U.S. Ends Moratorium on Farm Loan Foreclosures

WASHINGTON — The federal government is ending a 25-month moratorium on farm loan foreclosures with the preparation of foreclosure warnings to thousands of farmers with overdue loans, the New York Times reported Wednesday.

The Farmers Home Administration, a division of the Agriculture Department, began preparing the warnings Tuesday, the newspaper said, a move that comes as growers face what agricultural experts describe as the worst farm economy in half a century, with little prospect of improvement in the near future.

Approximately one-third of about 275,000 farmers with outstanding FHA loans are behind in their payments, federal officials said, adding the agency could not estimate how many farmers would be forced to give up their farms under the new program.

In Wake of New Farm Laws

The foreclosure notices come in the wake of presidential signatures on two farm bills, drafted by Congress in the last days before legislators recessed for the Christmas holidays.

One measure, the 1985 farm bill, was signed last week by President Reagan and will lower the price the government pays farmers for their crops. The new law's critics charge that it will cause a continued drop in farm incomes--in sharp decline since 1981.

A second bill would buttress the ailing Farm Credit System, which holds nearly one-third of the nation's farm debt, by establishing a new government entity to absorb billions of dollars in delinquent loans.

But it will also result in foreclosure on tens of thousands of farms, many of which were unable to otherwise find loans and often sought out the Farmers Home Administration as the lender of last resort.

"We are going to see a massive new wave of foreclosures and farm liquidations in 1986," Mark Ritchie, farm policy analyst for Minnesota's department of agriculture, told the newspaper. "The Farmers Home Administration, and other lenders, including the Farm Credit System, are faced with an impossible situation.

'Lost 5,000 Farms in '85'

"They have to make a decision next year about which farmers they want to keep in business and which ones they can't help. We lost 5,000 farms here in 1985; we expect to lose double that number next year. Our studies show it's the same situation and worse in every other farm state."

For rural economies, the implications are ominous, Ritchie said. "For every 10 farmers that go out of business, we lose a business in a small town. For every farm that goes out, we lose three jobs. It's just a mess."